The global debt stock hit a new record in the first quarter of 2024, increasing by $1.3 trillion in just three months.
This deluge in borrowing is a widespread trend across economies.
While the U.S. and Japan were the largest contributors across advanced economies, China, India, and Mexico drove the largest share in emerging markets.
Overall, the global debt-to-GDP ratio reached 333% as higher debt servicing costs and growing debt burdens continue piling up.
This graphic shows the stock of global debt in 2024, based on data from the Institute of International Finance (IIF).
A growing mountain of debt
Since the onset of the pandemic, debt has surged by 21%, adding $54.1 trillion to the global total.
Today, the largest share of debt is held by non-financial corporations, at $94.1 trillion, while government borrowings follow closely behind at $91.4 trillion.
Meanwhile, the financial sector holds $70.4 trillion in debt and households carry $59.1 trillion.
While stimulus measures fueled an influx of borrowing, it is leaving many economies in a more precarious state.
In America, debt servicing costs are now more than defence spending, and the interest bill is set to rise further.
Consequently, the government may need to raise taxes or cut spending in order to tackle its debt.
So far, neither political party has a meaningful strategy that addresses the country’s fiscal sustainability.
For emerging markets, increasing debt burdens present greater risks.
These risks are especially acute if a country experiences sluggish growth during a high-rate environment.
In this scenario, many emerging markets may need to restructure their debt as borrowing becomes unaffordable.
Even more concerningly, about a third of emerging markets have not recovered from the pandemic, with per capita income standing beneath levels seen in 2019.
Over the quarter, debt held by emerging markets hit a record $105 trillion, climbing by $55 trillion over the last 10 years.
Guest author is Dorothy Neufeld, Editor of Advisor Channel at The Visual Capitalist. You can read the original article here.
